To achieve the 2030 target, a new report from the Parliamentary Budget Officer concludes that the ownership cost of zero-emission vehicles in Canada needs to fall by 31 per cent

A new report from Canada’s Parliamentary Budget Officer (PBO) has found that the ownership cost of electric vehicles will have to come down by 31 per cent to reach the federal government’s 2030 zero-emission vehicle (ZEV) sales target, as spelled out in its Electric Vehicle Availability Standard.

The standard, introduced last December, requires all new vehicle sales to be ZEVs (battery electric as well as plug-in hybrid vehicles with an electric range above 80 km) by 2035, with interim targets of 20 per cent ZEV sales by 2026 and 60 per cent by 2030.

The PBO report was released last week, just days after the Liberal government announced it is moving forward with a 100 per cent tariff on Chinese-made electric vehicles — a move that critics say will delay the availability of cheaper EVs for the Canadian market.

Clean Energy Canada, one of those critics, quickly noted the timing of this news.

“The PBO’s analysis comes the same week as the federal government announced 100% tariffs on Chinese-made EVs, which will result in fewer affordable electric options for Canadians and less market incentive for North American automakers to make cheaper EVs,” said Joanna Kyriazis, director of public affairs at CEC in a statement.

“As a result, the EV sales requirements in the standard — along with other government funding and incentives — are more important than ever in ensuring Canadians can access the cost-savings of going electric.”

Baseline growth rate falls short

As a starting point, the PBO used data from Environment and Climate Change Canada which shows the project growth rate of ZEV sales in the absence of any ZEV standard. According to this baseline scenario, ZEV sales in 2030 would rise to between 35 and 40 per cent (versus the 60 per cent target) and just 51.8 per cent in 2035, a far cry from the government’s 100 per cent target.

“There are several ways that market conditions could evolve to meet the 60 per cent ZEV market share by 2030 as required by the standard,” reads the report. “These include faster changes in consumer preferences, unexpected technological advances, new policy measures and price adjustments by auto manufacturers.”

For the purposes of its analysis, the PBO assumed that three of those conditions — preferences, technology and policies — remain unchanged. That isolates pricing and cost of ownership as the only lever available to push adoption higher to meet target levels.

On the cost of ownership, the PBO compared the purchase price of new vehicles, including federal and provincial rebates for electric vehicles (though it assumes rebates will cease at the end of 2025 federally and the end of 2026 provincially), along with the operating and maintenance costs over eight years.

Current ownership savings not enough

In every scenario — whether the vehicle is bought in 2022, 2026, or 2030 — EVs cost more upfront than equivalent ICE models; however, EV drivers will still save more over the eight-year ownership period due to significantly lower operating and maintenance costs.

Despite these savings, the PBO states that this isn’t enough to persuade more people to buy ZEVs.

“According to our estimates, in order to induce a change in consumer behaviour to reach the 2030 target, the relative cost of owning a ZEV compared to ICE vehicles will have to drop by 31 per cent,” says Parliamentary Budget Officer Yves Giroux in a statement.

For example, under current conditions, owning a battery-electric truck will cost about 95 per cent of what it costs to own a traditional ICE truck over eight years. But in order to achieve the government’s EV sales targets, this cost would need to decrease so that owning a BEV truck is only 65 per cent of the cost of owning an ICE truck, explains the report.

Lessons from other markets

Kyriazis points out that EVs made up 24 per cent of all vehicle sales in Europe in 2023 and reached 44 per cent in China this spring. In comparison, the most recent data from Statistics Canada shows that zero-emission vehicles currently make up only 11.3 per cent of new vehicle registrations in Canada.

A key reason for this difference is the range of options available to consumers. In Europe, buyers have at least 11 electric models priced under $45,000, whereas in Canada, there are only two options in that price range.

One way or another, as the PBO report makes clear, this means automakers will have to start making and selling cheaper EVs in order to achieve the target required under the standard.

EV charging needs

The PBO report also looks briefly at expected Level 2 and DC fast-charging buildout under different scenarios. There, it pegs the expected number of chargers that will be installed by 2030 under the standard to be slightly lower than the need estimated in a report released in July by Transport Canada that was prepared by Dunsky Energy + Climate Advisors.

It also says current funding allotments for charger procurement and installation are nearly in line with the need.

“Our projection of charging ports implies total public support of roughly $2 billion by 2030, which is slightly higher than the $1.8 billion in government funding that has already been announced,” says the report.